Over $1 million in red, IFest foundation to file for bankruptcy

Over $1 million in hole, downtown festival organizers to seek bankruptcy

Laser beams and visual images on skyscrapers light up the downtown sky in April 1986 during Jean Michel Jarre's "Rendez-Vous Houston: A City In Concert," as part of the Houston International Festival.

Laser beams and visual images on skyscrapers light up the downtown sky in April 1986 during Jean Michel Jarre's "Rendez-Vous Houston: A City In Concert," as part of the Houston International Festival.

Photo: Steve Ueckert

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Laser beams and visual images on skyscrapers light up the downtown sky in April 1986 during Jean Michel Jarre's "Rendez-Vous Houston: A City In Concert," as part of the Houston International Festival.

Laser beams and visual images on skyscrapers light up the downtown sky in April 1986 during Jean Michel Jarre's "Rendez-Vous Houston: A City In Concert," as part of the Houston International Festival.

Photo: Brett Coomer, Staff

Over $1 million in red, IFest foundation to file for bankruptcy

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After years of declining ticket sales and growing debts, the organizer of the Houston International Festival announced Tuesday it will file for bankruptcy, potentially lowering the curtain for good on the city's oldest civic celebration.

"Over the past few years, the Foundation has sold all of its assets to pay its bills and has no assets left at this time," read a statement from the board of directors. "The hope had been that this year's festival would have provided some profit to begin to pay off some debt, but that did not happen."

The festival foundation had said it needed strong attendance at this year's IFest to start moving the nonprofit out of the red. The foundation reported in federal disclosure forms last summer that it owed at least $725,000, a figure the group now puts at "slightly over $1 million."

The bankruptcy announcement surprised and saddened Houston leaders and philanthropists who credit the event, first billed as Main Street Art Happening in 1971, for growing the city's arts culture and laying the groundwork for other street festivals.

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Mayor Annise Parker said in a statement that she wished the group well "as they maneuver through this."

"This is an organization that has provided wonderful entertainment and cultural offerings that have been enjoyed by thousands of Houstonians and visitors for many years," she said. "While there have been financial struggles in recent years, it is important to remember what they've built."

Business executive and philanthropist Robert Sakowitz lamented the news from the group he helped start. He served on the board until 2009. "I hope something can be done to modify and resurrect it in the future," he said.

Foundation board chairman Harry Gee could not be reached for clarification Tuesday about whether the group hoped to salvage the event despite the pending bankruptcy filing.

"The International Festival has been a great community asset and it's something that a lot of people have thoroughly enjoyed," Gee said Monday. "We're really proud of it, but we're waiting to get more information."

Earlier this year, foundation leaders had pledged to fight to keep Houston's oldest and once largest festival alive.

In Tuesday's announcement, the foundation board said it would file for protection under Chapter 7 of the federal bankruptcy law. Under Chapter 7, the most common form of bankruptcy, a court clears most debt in exchange for the entity selling its assets to provide partial payment to creditors.

Festival competition

In the statement Tuesday, the group attributed its financial troubles to an increase in the number of music and cultural events sponsored in the city and failures to find investors or partners that could help the nonprofit move forward in the black.

Other factors included repeated rainy weather that reduced festival attendance several years and declining profits from the Thanksgiving Parade, which the foundation had produced for several years until last year.

In recent years, spending had outpaced income by $250,000 a year.

In 2013, the group relied on advances from the city of Houston and the Houston Arts Alliance, funded by hotel occupancy taxes, to pay basic bills of the festival.

The foundation sought help from the Executive Service Corps of Houston, which provides free consulting work on all aspects of nonprofit management and finances. The corps worked with the foundation board to build a sustainable budget and expand its membership. They discussed plans for a fundraising campaign for a 50th anniversary celebration in 2020 that leaders hoped could be start of a debt-free second era.

Making changes

Over the last two years, the nonprofit laid-off staff or switched workers to contracts, shed its role as organizer of the Thanksgiving Day Parade, sold its stock of floats and moved into a smaller warehouse.

Stoilis, who declined to be interviewed Tuesday, said in April that the nonprofit had paid down its debt by more than $150,000. That included $86,000 owed to the city for the 2013 festival, as well as payments to vendors and two lines of credit.

Foundation officials entered this year's festival realistic about the challenges, but optimistic, Stoilis and board members had said.

Over the last weekend in April and first weekend in May, the festival spotlighted Australia and Houston's diversity with a multitude of ethnic food vendors, demonstrations of Down Under skills and music by Australian bands. During the school year, the nonprofit shared lesson plans with area schools that explored Australia's history and culture.

City figures from this year's revenue sharing agreement show attendance and concessions revenues again declined. In addition to event fees, the group pays the city 10 percent of admissions and 8 percent of concessions.

The group missed a deadline last week to report final revenue numbers, but an earlier email estimated what the group would owe.

The amounts are nearly half of what the group paid to the city for last year's event, city officials confirmed. The foundation provided the Chronicle with an updated figure that was comparable to the estimate.

The group says nearly 100,000 people attended this year's celebration. City figures show that a fraction of that crowd paid full price.

The nonprofit told the Chronicle in an email that it exceeded its corporate sponsorship goal by 19 percent, but admissions revenue fell short of expectations by 39 percent, or about $150,000.

Record-setting event

This year's attendance contrasts sharply with the festival's early years as the arts-focused Houston Festival when more than 200,000 people annually crowded downtown. The 1986 Rendez-Vous musical and light performance that celebrated the state's sesquicentennial once held a Guinness World Record for the 1 million people who crammed near a downtown stage and watched from cars parked on freeways.

It became the Houston International Festival, or IFest for short, in 1987.

"The Board is grateful for everyone who has supported us throughout the years," read the statement.